A robo-advisor is a digital financial advisor that offers automated and algorithm-driven services for building and managing your investment portfolios. Robo-advisors typically use predefined rules, strategies, algorithms and data to invest on your behalf. 

With lower advisory fees, robo-advisors have become the low-cost and efficient alternative to traditional financial advisors.

Using the information provided by the investors, robo-advisors develop the investor’s profile and understand and predict investors’ preferences, risks and goals. Robo advisors offer services including regular rebalancing of investor profiles, financial planning tools, tax-loss harvesting and other tax strategy offerings. 

Are robo advisors good for you?

Robo advisors are low-cost alternatives to traditional advisors, offering similar services as financial advisors but without the cost of manual labour. They are also developed to be easy, accessible, and straightforward, offering full access to portfolio management tools. 

Robo-advisors also offer a comprehensive set of services including retirement planning, tax-strategy schemes, and portfolio rebalancing. They simultaneously manage your portfolios, while ensuring that you reach your investment goals and minimise liabilities. 

On the other hand, robo advisors cannot offer tailored investment services like traditional financial advisors. Human advisers have the capability to suggest long-term investment solutions and avoid bad investments, while robo advisers simply automate decisions based on your basic information and investment goals. In difficult market conditions, robo advisors might not perform as well, or as quickly, as an actively managed portfolio. However, with rapid advancements in technology, robo advisors are becoming increasingly capable of handling complex customer requirements. 

Robo advisors also suffer from the uncertainty developed towards automated products in the market and are considered untrustworthy by some investors. As automation becomes a more normal part of people’s lives, the benefits of robo advisors are coming to light. 
Before deciding to use an automated investment solution, it is important to understand both sides of the coin and choose the one that aligns with your investment goals.

Active Investing vs Passive Investing 

Active Investing involves investments in actively managed funds or stocks with an aim to get maximum returns. Active investing is considered to be higher risk as the goal is to beat the stock market and take advantage of price fluctuations or trends. Active investing or actively managed investing can be undertaken either by the investor themselves or by a financial advisor respectively.

Passive Investing, on the other hand, is viewed by some as a safer mode of investing, in which investors use passively managed funds, ETFs, and index-funds to perform in-line with markets. The goal is to match the performance of certain market indexes, rather than outperform them like their active counterparts. The reduced trading volumes in passive investing leads to lower costs for individual investors. It also offers easy diversification, and the benefits of frequently investing (dollar-cost averaging) can enable investors to smooth risk and returns associated with timing markets. Passive investing also offers increased transparency (vs actively managed portfolios).

Passive investing is on the rise and has been consistently outperforming its counterpart, especially owing to high fees and trading commissions. According to studies conducted by Morningstar and S&P Global, of the nearly 3,000 active funds analysed, only 47% survived and outperformed their average passive counterpart in the 12 months through June 2021.
WealthKernel’s trading API lets you execute model portfolio orders, offer execution-only customers the ability to trade fractional stocks and ETFs seamlessly, own securities in multiple currencies, or buy passive robo-advisor products.

We support multiple trading venues and access thousands of securities across the globe, and we're one of only two firms in the UK to offer fractional ETFs over API.

Want to learn more about our
robo advisor offering?

Ready to get started?